Investing, Asset Allocation, Economics & the Search for the Bottom Line

Manufacturing Activity Strengthens In April

The first major economic report for April brings encouraging news. Economic activity in the manufacturing sector expanded last month, the Institute for Supply Management reports. One update must be taken in context with the broader trend, of course. Indeed, a single report can’t wipe away the recent worries about another spring slowdown. Still, today’s ISM news offers a timely burst of optimism that promotes the idea that the weak economic news in some corners over the past several weeks isn’t necessarily the last word on what’s ahead.

“This month’s increase [in the ISM index] is yet another sign that the U.S. manufacturing sector has been one of the most reliable sources of growth in the U.S. economy since the Great Recession ended,” says Alistair Bentley, a TD Bank economist. Scott Brown, chief economist at Raymond James & Associates, agrees. As he tells Bloomberg: “Manufacturing is still in pretty good shape. U.S. manufacturing will outperform its counterparts in Europe. At the points, we’re in a steady-state [economic] expansion.”
Indeed, the rise in ISM’s overall manufacturing index to 54.8 last month—up from 53.4 in March—elevates this gauge to its highest since last June. (Any reading above 50 indicates growth.) The pop was accompanied by gains last month in ISM’s employment and new orders indices for manufacturing, suggesting that there’s broad improvement in the sector.
Is manufacturing’s continued growth in April a sign that the broader economy will perk up too? The deluge of economic data in the days and weeks ahead will bring an answer soon enough. Meantime, there’s a new reason to think positively.
“ISM suggests there’s no real reason to get too concerned about the path of the U.S. economy at this point,” counsels Nick Bennenbroek, head of FX Strategy at Wells Fargo for North America.